Royal Bank of Scotland took a reckless gamble with its purchase of ABN Amro and its board failed to stand up to a hard-headed boss, dragging the bank to the brink of collapse three years ago, a report on Monday is expected to show.
Britain's financial regulator -- the Financial Services Authority (FSA) -- is also expected to sharply criticise its own role in Britain's largest bank failure in the keenly awaited 500-page report, due out at 0600 GMT.
Regulators should be given greater powers to block future takeovers and directors of banks should put less emphasis on profit and more on risk management, the report will recommend, according to Sky News.
It will propose that bank directors are forced to prove their innocence in the event of a future bank failure and may have to forfeit earnings, Sky said.
The FSA will also say it failed to spot problems at RBS because it was under political pressure to operate a hands-off regulatory regime, putting blame on former Chancellor and Prime Minister Gordon Brown, the Sunday Times reported.
RBS came within hours of running out of cash in 2008 and was
only saved by a 45-billion pound taxpayer bailout.
It was brought to its knees by a decade-long acquisition spree led by former Chief Executive Fred Goodwin and his strategy to run with too low a capital cushion.
They combined with the disastrous purchase of the investment bank arm of Dutch bank ABN Amro.
The bailout left the government owning 83 percent of the bank, and the taxpayer appears unlikely to recoup its investment any time soon following a slump in its shares this year.
The FSA report will track the meteoric rise of the once small Scottish retail bank to become one of the world's biggest banks thanks to an aggressive expansion into wholesale banking that later threatened to fell the entire UK financial system.
Goodwin's authoritarian management style, discouraging dissent among senior staff and the failure of other directors to stand up to him, are expected to be blamed in the report for allowing him too much power.
The FSA cleared Goodwin and other top executives of wrongdoing a year ago -- and is not expected to restart any proceedings against anyone -- and attempted to close the matter with a brief 300-word statement.
But politicians demanded a full public account, forcing the FSA to backtrack to analyse the causes of failure, investigate decision-making, risk controls and governance, and assess its regulation and supervision of the bank.
(Reporting by Steve Slater and Kirstin Ridley; Editing by David Hulmes)